Title Tip: For Russian Buyers, Sanctions Over Ongoing War With Ukraine Make Transactions Impossible

Focus on the war in Ukraine has dwindled lately with current public attention on violence here in the U.S. However, title companies remain diligent about real estate sanctions against Russia and designated Russians singled out by the U.S. government.

The U.S. Department of the Treasury’s Office of Foreign Assets Control (OFAC) has recently taken action against Russian industries, government officials and some high-net-worth individuals and their families.

No Fly = No Buy

Think of the OFAC restrictions as the No-Buy list for real estate. The names of companies and individuals connected with sanction targets are placed on the Specially Designated Nationals and Blocked Persons (SDN) list. This list has expanded with the Russia-Ukraine conflict.

When handling a transaction, the title company must check the names of all parties involved against the SDN list maintained by OFAC. This includes individuals as well as entities such as corporations, partnerships, and LLCs. Federal laws prohibit real estate and title companies and employees from doing business with any person on the SDN list.

Complying With Guidelines

Texas title companies also continue to follow the Bank Secrecy Act guidelines and Geographic Targeting Orders aimed at criminals and terrorists.

Geographic Targeting Orders (GTO) are directives made by the U.S. Treasury’s Financial Crimes Enforcement Network (FinCEN). These regulations are made to inhibit money laundering, tax evasion, and terrorism financing on real estate transactions. They apply to residential sales over $300,000, which do not involve a mortgage company on the purchase, and when the buyer is a legal entity (vs. an individual).

The GTO requires title companies to collect information and report details about the buyer and the transaction. This includes details on the entity itself as well as any individuals representing the entity, and any person who directly or indirectly owns who owns 25 percent or more of the equity.

The “geographic” areas in Texas that are targeted include Dallas, Tarrant, and Bexar counties. Any person or individual flagged by OFAC, or a government organization is going to experience significant challenges with a real estate transaction in Texas or elsewhere in the U.S.

Title companies are likewise required to freeze the assets of any SDN-listed individual or entity. OFAC has strict reporting requirements and real estate-related businesses must comply with its regulations. Steep fines for violating their sanctions go into the millions of dollars plus up to 30 years jail time.

Texas Not Popular With Russians

Individuals and entities on the SDN list are known to move from country to country and end up in unexpected locations across the U.S. But interestingly, Texas is not a popular state for Russian buyers. Russian buyers prefer Florida, New York, California, and get this — Georgia.

Florida, which has had the biggest share of Russian buyers over the past two years, reports that properties bought by Russians only account for 0.2 percent of the state’s total real estate market. Even before the current conflict in Ukraine, Russian activity in both Texas and U.S. real estate was monetarily insignificant.

The direct effect of the Russia-Ukraine war on the U.S. housing market continues to be minimal. Russian buyers have virtually no effect on our strong Texas housing market.